August 7, 2007

A Nice Place to Visit, But… (OT)

Last month, dozens of people came to visit Stephen Grant’s Michigan home, on display in advance of a foreclosure sale (the bank had taken over the home because Stephen hadn’t made any payments since February, when he allegedly dismembered his wife Tara, hid her torso in the garage and other parts of her body nearby, then reported her missing) — but when it came time to place a bid on the house, nobody was interested.

The home was listed at just over $220,000, more than $45,000 below its appraised value. A local real estate agent says he doubts a house with this history could sell for more than $150,000.

So I’m going to throw out a question here: What sort of discount would it take for you to buy a home that was the site of a recent, gory, highly-publicized murder?

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I’ve heard of a study on this topic – I think it was reported on the “This American Life” radio show. Turns out there’s a relatively small discount on average, and it tends to fade after a few years.

I suspect it’s more that the housing market is bad now.

Realistically, you’ve got to figure there’s going to be some nuisance effect from tourists, but that’ll vary a lot with location. Something near a main highway is going to be worse than something in a rural town, even at identical publicity.

Highly stigmatizing events can cut as much as 15 percent to 25 percent from the price a home would otherwise fetch, according to appraisers who specialize in such homes. The largest markdowns are associated with explosive scandals that receive broad media attention.

After two or three years, the stigma begins to diminish. “Time passes, people forget,” said Frank Harrison, an appraiser in north suburban Woodstock, who has researched and appraised dozens of affected properties.

A broader examination of scandal-tinged homes shows the effect may, in many cases, be minimal. In a 2000 study, James Larsen, a finance professor at Wright State University in Dayton, Ohio, surveyed more than 100 stigmatized homes, including those associated with sex scandals or murders, or deemed to be haunted. The homes sold for just 3 percent less than those not associated with scandal but stayed on the market about 45 percent longer

I don’t think I would need much of a discount. Why do people have a problem living in such a house? Is it because it’s gross to live in a house where murders occurred, or because annoying tourists will come trample on your lawn?

Generally I wouldn’t discount much for a (temporarily) famous gory murder, but I would be wary of a hidden body parts murder. Are they positive they found the entire victim? Is anyone else in the neighborhood missing?

Anyone heard of Kali Ann Poulton (sp?), famous abduction victim? They found her, years later, in the building I worked in. Employees coped. Time passed. Life went on. The issue just became a creepy novelty instead of a debilitating horror.